Great read and study for me. Makes one wonder what America would have been like today if Jefferson had won out. Thanks MA
Peace, Doc On Dec 19, 1:49 am, "M. Johnson" <[email protected]> wrote: > Hamilton's Counterfeit CapitalismbyGeorge F. Smith > Posted on 12/16/2008 > As we await Bush's replacement to straighten our wayward lives, it's crucial > to understand how we got here and why policy makers are so determined to do > the wrong thing. Austrian economics explains why their policies are flawed, > butno one with a voiceseems to care. When history confirms that hands-off is > the only effective and humane approach to a bust, and to prosperity > generally, while hands-on brings ruination, why do governments today consider > every option but free markets? > You could blame it on the heavy influence of Keynesianism, but we could ask > why Keynes is so popular. He got away withblaming the marketfor the > Depression of the 1930s. How can his followersdo the same todayafter 70 more > years of intense interventionism? To read today's mainstream commentaries, > you would think the free market slipped in the back door when no one was > looking. > We know governments have always meddled in their economies, but the United > States was supposed to be appreciably different. Did we begin with unhampered > markets, witness their failure, then switch to a more "progressive" approach? > At what point in our history did we begin promoting interventionism as an > ideal? > Review the country's founding, and it isn't immediately obvious where the > state's heavy hand first made its mark. Nowhere in the Declaration, for > example, do we find a footnote calling for high taxes and a central bank to > support our inalienable rights. It's hard to imagine that the patriots who > fought at Breed's Hill or Yorktown were inspired by visions of a massive > redistribution of their wealth to special interests. But when we consider the > Constitution's "general welfare" clause, we start to wonder. Was it colonial > shorthand foranything goes, provided sufficient political support? > Thomas Jeffersonsaid no; Congress did not have unlimited powers to provide > for the general welfare, "but were restrained to those specifically > enumerated." His political rival Alexander Hamilton, on the other hand, had > two answers. As the author ofFederalist #84, in which he referred to > constitutions "as limitations of the power of government itself," he might > agree with Jefferson, at least publicly. But later, as Treasury secretary > under Washington, he dropped the façade of government restraint. As long as > any proposed legislation was "in the public good," he considered it lawful > under the Constitution. > As Thomas J. DiLorenzo tells us in his engaging new book,Hamilton's Curse:How > Jefferson's Arch Enemy Betrayed the American Revolution and What It Means for > Americans Today,Hamilton dismissed Jefferson's strict constructionism and > viewed the Constitution as a grant of powers rather than as a set of > limitations. With clever manipulation of words, he believed, the Constitution > could be used to approve virtually all government actions without involving > the citizens at all.In a recentarticle, DiLorenzo says that Hamilton "fought > fiercely for his program of corporate welfare, protectionist tariffs, public > debt, pervasive taxation, and a central bank run by politicians and their > appointees out of the nation's capital." > Regarding the stipulation that policies must promote "the public good" or > serve "the public interest" phrases that Hamilton used countless times > DiLorenzo reminds us that "no government policy can be said to be in 'the > public interest' unless it benefits every member of the public." And how > often does that happen? The "public interest" turns out to mean favored > special interests. > A Revolutionary War hero and aid to General Washington, Hamilton began > pushing for "a government of more power" in 1780; and in 1787, with the help > of agross distortionof Shays's Rebellion, he brought state delegates together > for the Constitutional Convention, the proceedings of which were closed to > the public. According to an1823 bookby John Taylor of Caroline, which relied > heavily on notes taken by Convention delegate Robert Yates, Hamilton moved > quickly to consolidate all power in the hands of the executive branch, > proposing a permanent president and senate. > Governors of the states would be appointed by the national government, and > any state law that conflicted with the federal constitution would be > considered void. What Hamilton wanted was a "great" national government much > like the one from which Americans had recently seceded. Not surprisingly, the > convention attendees rejected his proposal, establishing instead a > confederation of free and independent states that delegated a few specific > powers to the central government. > In 1802, Hamilton privately denounced the Constitution as "a frail and > worthless fabric," but by then he had already established the methodology for > rendering it irrelevant, as DiLorenzo puts it, through the "lawyerly > manipulation of its words."Hamilton's AgendaIn his 1791Report on > Manufactures, he urged Congress to authorize the payment of "pecuniary > bounties" (subsidies) to the manufacturers of certain items, on the basis of > the general-welfare clause. The clause was "doubtless" intended to mean more > than what it expressed, Hamilton argued, so it was up to Congress to decide > what it meant and how to fund it. As DiLorenzo points out, generations of > nationalist judges have used Hamilton's argument to expand the government far > beyond its constitutional limits. > In addition, the nation, not the states, had "full power of sovereignty," > Hamilton insisted. The states were "artificial beings" and thus it would make > no sense to talk of their right of secession though somehow those same > artificial states hadunited to secede from England. Furthermore, Hamilton > argued, the Constitution grants the government "implied powers," one of which > was to establish a national bank topromote a "paper circulation"and thereby > extend loans in excess of its reserves of gold and silver. Hamilton said the > Constitution's commerce clause gave government the power to regulate all > commerce, not just interstate commerce. A national bank, which would regulate > commerce within states, was thereby authorized. > As DiLorenzo explains, Hamilton and his nationalist compatriots couldn't make > mercantilism work with a confederation of sovereign states. If northern > states passed a high protectionist tariff, for example, imports would flood > into the low-tariff southern states, then spread to the rest of the country. > With a nationalist government, high tariffs could be imposed on all states, > with some states effectively being taxed for the benefit of other states.A > Standing Army of Tax CollectorsHamilton interpreted the Constitution's "war > powers" to mean "thatunlimitedresources should be given to the military, > including conscription and a standing army in peacetime," DiLorenzo writes. > "He also wanted government to nationalize all industries related to the > military, which in today's world would mean virtually all industries." > A standing army in times of peace was necessary to enforce government > taxation. And what better way to make this point than to do a little > enforcing? Thus, in 1794, Hamilton personally accompanied President > Washington to western Pennsylvania with 13,000 conscripts and officers from > the creditor aristocracy of the eastern seaboard to crush the so-called > Whiskey Rebellion. After rounding up a score of tax rebels, some of whom were > old and veterans of the Revolutionary War, Hamilton drove them through the > snow in chains all the way to Philadelphia, where he ordered local judges to > issue guilty verdicts and sentence them to be hanged. Washington, who had > returned home before the cross-state slog, pardoned the only two who were > eventually convicted, leaving Hamilton bitterly disappointed. > Other areas of the American frontier in Maryland, Virginia, North and South > Carolina, Georgia, and the entire state of Kentucky engaged in home whiskey > production and fiercely opposed the new tax. Whiskey was not only a beloved > consumable, it served as money, as a medium of exchange, and locals > considered the tax as onerous as the king'sStamp Tax of 1765. There was no > rebellion in these areas because no one was willing to collect the taxes. > Hamilton had picked the four counties in western Pennsylvania as his target > because local officials were corrupt enough to help him. > The tax and the federal assault on the protestors put the spotlight on > Hamilton's "public interest" tactic. As Rothbardnoted, "in keeping with > Hamilton's program, the tax bore more heavily on the smaller distilleries. As > a result, many large distilleries supported the tax as a means of crippling > their smaller and more numerous competitors." The smaller distillerieswere > taxed by the gallon, while the larger ones paid a flat fee. > The hated tax also helped get Jefferson elected in 1800. The election > resulted in a tie between Jefferson and Aaron Burr, and was thus thrown into > the House. Selecting who he considered the lesser of two evils,Hamilton used > his influenceto break the tie in favor of Jefferson, a deed that helped bring > about his fatal duel with Burr in 1804. > But before Jefferson took office, DiLorenzo explains, Federalist President > John Adams helped Hamilton's cause when he appointed hundreds of "midnight > judges" to the federal judiciary in the last 19 days of his administration. > Though Jefferson got rid of most of them, he overlooked the appointment of > Hamilton idolater John Marshall, who served as chief justice from 1801–1835. > "InMarbury v. Madison[1803] John Marshall essentially asserted thathe, as > chief justice, had power overallcongressional legislation," DiLorenzo writes. > This was consistent withFederalist #78, where Hamilton said it belongs to the > courts "to ascertain [the Constitution's] meaning as well as the meaning of > any particular act proceeding from the legislative body." ThoughMarbury v. > Madisonmarks the birth of judicial review, the Hamiltonian idea that the > government should be the sole judge of its own actions didn't prevail until > it was imposed by force of arms during the War between the States.Hamilton's > DisciplesFollowing Hamilton's death, Kentucky senator Henry Clay, a wealthy > slaveholder known as the "prince of hemp" for his huge hemp crops, joined > Marshall and others in promoting statism and corporate privilege. As > DiLorenzo tells us, Clay "spent decades, literally, advocating protectionist > tariffs on foreign hemp; government-subsidized roads and canals, so that he > could transport his hemp eastward; a nationalized bank that could inflate the > economy." Clay wanted to force complete self-sufficiency on the country and > deprive Americans of the benefits of the international division of labor a > good deal for Kentucky hemp growers, but not for consumers. > Far from bringing about the harmonious relations Clay promised, his > mercantilist agenda provoked sectional strife. The tariffs he championed > "overwhelmingly favored northern states," inasmuch as there was little > manufacturing in the South even by the 1860s. "To southerners, tariffs were > all cost and no benefit." Protectionist tariffs, an essential part of > Hamilton's scheme for a mercantilist America, would be a prime mover of the > forces for war. > When Lincoln became president, he moved quickly to implement Hamilton's > system of corporate welfare. Not even his bloody war deterred him. He and his > majority Republicans imposed tariff rates of 50 percent, authorized enormous > subsidies to railroad corporations, and created a nationalized banking > system. Greenbacks issued under the new system depreciated by more than half, > and consumer prices in the North more than doubled between 1860 and 1865. > Because of the inflation, real wages plummeted, and the war ended up costing > northern taxpayers $528 million more, DiLorenzo says. > The Credit Mobilier scandal of 1882 was the most notorious consequence of > Hamiltonian corporate welfare, but, as DiLorenzo notes, "it was only the tip > of the iceberg" of the predictable waste and corruption that results from > government favors. The public was outraged over the scandal and called for > more political control of business they called, in other words, for more of > what created the problem in the first place. > As Gabriel Kolko showed in his 1963 ground-breaking work,The Triumph of > Conservatism, "American businesses, far from resisting political > control,soughtsuch regulation because they could use it to their advantage," > DiLorenzo explains. The railroad industry, for example, lobbied for creation > of the Interstate Commerce Commission, which soon outlawed discounts to > customers. Cornelius Vanderbilt had been engaging in this "ruthless" > practice, but "[b]y making discounts illegal, the ICC relieved railroad > companies from the pressure to compete for customers." Other businesses such > as gas and electric utilities turned to the political arena for grants of > monopoly seeking to obtain from government what they failed to achieve on the > market.The Hamiltonian Revolution of 1913In 1913, government acquired > effective control of the country's wealth and strengthened its rule over the > states by passing three laws: the income tax, the direct election of > senators, and the federal reserve act. The first two arrived as the Sixteenth > and Seventeenth Amendments; the "currency bill" was slipped in just before > Christmas. All three, per Hamilton's rhetoric, were promoted under cover of > "the public interest." All three were cons abuses of confidence by public > officials. All three "delivered a death blow to the old Jeffersonian > tradition in American politics," and brought about "the final, decisive > victory for the Hamiltonians." > Were these laws really so bad? Judge for yourself. > Prior to the Seventeenth Amendment, US senators were "ambassadors of the > states"; they were appointed by state legislatures. They would speak for > their state governments, which would presumably have control over how they > voted. Having senators appointed was intended as a check on the powers of the > federal government. It limited "senators' ability to sell their votes to > special-interest groups nationwide," DiLorenzo explains. Thanks to the > Seventeenth Amendment, political corruption has "expanded by orders of > magnitude," he says. "U.S. senators now travel all around the country seeking > special-interest campaign contributions." > An income tax was not popular in Hamilton's day, but he recognized the need > for high taxes to fund the "energetic" government he wanted. The first > federal income tax was imposed in 1862, and though it was abolished a decade > later, "the experience had whetted the appetites of special-interest groups," > DiLorenzo writes. By 1913, American farmers had made a deal wherein they > would support an income tax in exchange for lower tariff rates. The income > tax became law in 1916, and by 1930 tariff rates had soared to their highest > level ever 59.1 percent, on average. So much for the farmers' deal making. > After the adoption of withholding in 1943, the income tax became entrenched, > asCharlotte Twight has written, "both through its administrative apparatus > and through its acceptance in the minds of most taxpayers." With its > confiscation of enormous amounts of wealth and the army of bureaucrats and > agents needed for collection, the income tax renders states as well as > citizens hat-in-hand beggars when trying to influence the federal government. > In their relationship to Washington, states have become Hamilton's > "artificial beings." > Loathing and fearful of competition, big businesses in the late 19th century > tried to form voluntary cartels, but such arrangements are notoriously > unstable, DiLorenzo points out, so they turned to government to make them > work. What the big bankers wanted was a monopoly of the issue of bank notes > so they could have a more "elastic currency." Previously, if an individual > bank issued too many notes, depositors would get nervous and demand > redemption in gold. Because all banks issued more notes or deposits than they > had gold in reserve, they were all one bank run away from being exposed. > The currency act that created the Fed in 1913 was a crucial step in > eliminating this problem for the bankers. Two decades later, the government > took gold out of the picture, so that covering a member shortfall was no > longer a problem. Through the magic of the printing press, the Fed could also > provide instant revenue to the government to pay for military adventures. > The Fed and the income tax provided the "funding mechanisms" for getting the > United States into the European slaughterhouse called World War I. "Like all > wars, World War I permanently ratcheted up the powers of government and > fueled the urge among politicians to 'plan' American society in peacetime > just as they had planned in war," DiLorenzo explains. > The Fed has the power to do the one thing it shouldn't do: regulate the money > supply. By doing so itdistorts price relationsand guarantees a correction, > which, since 1929, the government regards as a clarion call to "do > something." Ignoring economic wisdom, it does everything it canto prevent the > necessary correction, thereby making the recovery longer and more painful. > When the economy pulls out of the depression, government takes the credit, > and the Fed begins inflating again, inaugurating another > boom-bust-correction/intervention-crisis sequence that will bear heavily on > almost everything we hold dear.Between 1789 and 1913, prices remained roughly > stable, DiLorenzo notes, and government waslittle more than a footnotein > people's lives. Since 1913, prices haveincreased twentyfold, while today > government intrusion has no limits.ConclusionAs withhis two books on Lincoln, > Thomas J. DiLorenzo has done a masterful job of exposing an American icon > whose influence has been highly detrimental to the majority who live outside > the rarefied reality of national politics. > Is there any escape from Hamilton's world? It all depends on us. The book's > last chapter, "Ending the Curse," calls for a "devolution of power." We need > to shake up theruling casteand strip the central government of its > Hamiltonian features, which means, among other things, ending judicial > tyranny, repealing the Sixteenth and Seventeenth amendments, outlawing > protectionist tariffs, and abolishing the general-welfare clause. We should > recall that the latter two measures were achieved in the Confederate > Constitution of 1861 as well as state constitutions in the antebellum period. > DiLorenzo also wants to dismantle "government's Hamiltonian monopoly on > money," which would in itself bea major setbackto despotic > government.Hamilton's Curseis a pleasure to read and a must-read for anyone > who values freedom and seeks a deeper understanding of the prevailing > nonsense.[VIEW THIS ARTICLE ONLINE]_________________________George F. Smith > is the author ofThe Flight of The Barbarous Relic, a novel about a renegade > Fed chairman. Visit hiswebsite. --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. 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